The Spirit of baggage fees

Spirit Airlines has made some news this week by announcing some tweaks to their fee structure. Most notably they are increasing the fee for carrying on a bag (they are the only US airline that charges for carry ons unless you consider charging for earlier boarding a form of charging for a carry on). If you carry on a bag and don’t pay for that until you hit the gate, it will set you back a C-note (see, for example, Spirit Airlines to charge $100 for late carry-on bags, Marketplace, May 4). I wasn’t feeling compelled to comment on this until I read Saturday’s Heard on the Street column (One-Hundred-Buck Bag Shows the True Spirit of Air Travel, Wall Street Journal, May 5). It noted the following about Spirit’s $100 fee.

Rather than being a big money-spinner, though, the increased fee is more likely a form of deterrence. It will be an incentive for passengers to pay their fees ahead of time, says aviation consultant Bob Mann of R.W. Mann & Co. This reduces costly delays caused by bottlenecks at the gate.

This is basically the argument that Gady and I make (along with our colleague Achal) in our paper about baggage fees (although we focus on checked bag fees): If providing an ancillary service like checking a bag or providing space in an overhead bin imposes a cost, it is best to charge for it. The goal in charging for the ancillary service explicitly (over bundling it with the main service) is to reduce use of that service (relative to bundling). For more, see here and here.

Additionally, the following carry-on items are not counted towards a customer’s carry-on bag allowance and can be brought with you on all flights free of charge – umbrella, camera, infant diaper bag, assistive devices, outer garments (e.g. coats, hats, and wraps), stroller, reading material, and food for the flight.”

I do not believe the cost based argument for pricing is valid.
“If providing an ancillary service like checking a bag or providing space in an overhead bin imposes a cost, it is best to charge for it. ”

If the customer does not see value in that service or worse, they see value but are not willing to pay because of reference price (especially $0 ref price) then charging for it is not an option. Discontinuing it or unbundling it from the main service is a better option.